ANZ seals deal to buy NZ bank

ANZ Banking Group Ltd, which has reached agreement to acquire The National Bank of New Zealand, said today that it would achieve moderately lower net profit growth in 2003/04 based on current economic conditions.

The bank today reported a net profit of $2.348 billion for the year to September 30, 2003, up from $2.322 billion in the previous year.

"The directors expect that ANZ will continue to perform well in a more difficult banking industry environment in 2004," ANZ chief executive John McFarlane said.

"Based on current economic conditions, the directors anticipate that for the year ending 30 September 2004 ANZ will see moderately lower growth in consolidated net profit after tax (excluding significant transactions) than it achieved in 2003."

At the same time the company said it had fewer chances for earnings growth in the year ahead compared to 2002/03 and noted the stronger Australian dollar was a significant challenge.

ANZ added that organic growth would be its priority.

"In the year ahead however, the environment is likely to be at least as challenging with fewer opportunities to achieve earnings growth in our specialist businesses at the levels achieved in 2003," Mr McFarlane said.

"However, by creating a very different bank we have improved our capacity to succeed and deliver market expectations."

The bank today also announced it had reached agreement with Lloyds TSB Bank plc to acquire The National Bank of New Zealand (NBNZ) for $A4.915 billion.

Last month ANZ secured regulatory approval from the New Zealand Commerce Commission to acquire NBNZ, clearing the way for the sale.

ANZ said today the purchase price excluded dividends to be paid to Lloyds of $NZ575 million from NBNZ's retained earnings prior to completion.

It also announced a two for 11 renounceable rights issue to raise about $3.6 billion to assist the funding of the purchase price of NBNZ.

It said under the rights issue eligible shareholders would be offered two new ordinary shares for every 11 existing shares at a discounted issue proce of $A13 per shares.

ANZ said it had invited NBNZ's current chief executive officer and director Sir John Anderson to head up both NBNZ and ANZ New Zealand.

ANZ added that it might consider listing an amalgamated ANZ (NZ) and the NBNZ on the New Zealand Stock Exchange.

However, this would not be before 2006 and would be consistent with ANZ maintaining a substantial majority shareholding in NBNZ.

ANZ said both the ANZ New Zealand and NBNZ brands would be retained.

The bank also said it would take whatever action was necessary to minimise the impact of the amalgamation of customers and ensure service levels were maintained.

It also said no material change was intended in the total number of branches in New Zealand.

NBNZ has around 300 branches across the country.

"The amalgamation will create the leading bank in New Zealand, and one of New Zealand's leading companies," Mr McFarlane said.

"This is a great outcome for ANZ, for NBNZ and for New Zealand.

NBNZ's Sir John said this was a good outcome for NBNZ, with the new organisation to be managed and staffed locally.

"It is an exciting new challenge for the management of both companies," he said.

"Together we have leading positions in most segments of the New Zealand market and we will have renewed momentum in growing the business."

ANZ said it would continue to work with the Reserve Bank of New Zealand in relation to issues raised by the RBNZ about the importance of the New Zealand banking system remaining independent.

Mr McFarlane said the acquisition was consistent with ANZ's strategy to have sustainable, top three positions in each of its core businesses.

ANZ said it was targeting operational synergies estimated at around $A110 million per annum pre tax within three years.

The bank also said integration plans had been developed to ensure the management team composed executives from both banks.

The purchase price is below the $6.5 billion Lloyds was believed to have been asking for NBNZ.

Mr McFarlane also said today that said while the Australian and New Zealand economies remained "sound", significant challenges were posed by low interest rates and associated margin pressure, the rising Australian dollar and softness in the international economy.

He said ANZ would build on its competitive advantage that exist in its specialist businesses and would continually evaluate opportunities to expand in Australia, New Zealand, the Pacific and to a lesser extent, Asia.

Mr McFarlane said organic growth would remain the bank's priority, based on realising the competitive advantages of its specialisation strategy.

"Specialisation creates a demonstrably more agile operation, able to respond rapidly to the opportunities presented with each business segment," he said.

ANZ would target further productivity gain through technology-based process improvements, he said.

Mr McFarlane said ANZ would also consider enhancing growth through selective acquisitions.

ANZ would also consider entering commercial agreements and partnerships where they provided a strategic fot with the bank's existing business.

Mr McFarlane said ANZ's regional international strategy was focused on consumer banking, however he said the bank had "no pressing urgency" for future investments.

ANZ booked operating income of $7.12 billion for the year to September, up from $6.99 billion.

It lifted its final dividend to a fully franked 51 cents, up from 46 cents.